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Monti gov't under fire as Berlusconi pulls support

Published on NewsOK Modified: December 6, 2012 at 12:57 pm •  Published: December 6, 2012
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After a period of seeming calm over Italy, investors have returned their focus to the country. The developments highlight the fragile nature of the consensus in Italy over Monti's economic reform program, which includes liberalizing the labor market and increasing the pension age.

The Milan stock exchange fell Thursday, with the benchmark FTSE MIB trading 0.7 percent lower, in contrast to most of Europe's main indexes, which were trading higher.

The worries were evident in the bond markets too, where the yield on the country's 10-year bonds rose by 0.12 percentage points to 4.52 percent.

The Italian economy, the third-largest of the 17 European Union countries that use the euro, is in recession as the government enacts tough measures to get a handle on its debts. Italy has the second-highest debt level as a percentage of its GDP in the eurozone — at 126 percent. Only Greece's debt is higher with 150 percent.

The popularity of Monti's government, over a year into power, has been slipped somewhat amid the recession, and political parties are positioning themselves for elections next year. The premier has said he would be available for a second term, but has excluded running for office. Monti sidestepped a reporter's question Thursday about his political intentions.

Monti could be tapped if no party wins a clear majority.

Berlusconi claims allies are pressing him to seek election again, hoping that Monti's painful austerity measures will win votes for the center-right.

Economic Development Minister Corrado Passera angered Berlusconi supporters by saying that it would not be good for Italy's image abroad "to go back."

"We need to give the sensation that the country is moving ahead," Passera said on RAI state-run television.

Besides showing poorly in the polls, Berlusconi also is appealing an October tax fraud conviction and awaiting a verdict in the coming weeks in his trial on charges of having sex with an underage woman and using his office to cover it up. He says he is innocent.

Leading the polls at present is the center-left Democratic Party, led by party secretary Pier Luigi Bersani who won his party's nomination in a two-weekend primary that reinvigorated the left.

While some smaller centrist parties have signaled that they would welcome another Monti term, Bersani has been particularly adamant that it is time for elected politicians to take over.

He called the center-right's tactics "irresponsible" and reaffirmed his party's loyalty and support of the Monti government during the present legislature.

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Barry reported from Milan. Frances D'Emilio contributed from Rome.